Lady Thatcher used Cold War rhetoric, telling the Tories socialism was not dead, only sleeping, and would reawaken if given the chance by bringing down the Government.
A row is expected in the Commons on Monday, with MPs threatening disruption of the Budget debate on Tuesday. Yesterday Downing Street said Mr Major was refusing to allow an emergency debate before Kenneth Clarke, the Chancellor, goes to the meeting of European finance ministers (Ecofin) on 2 December.
One backbencher said the Government's finger was "hovering over the self- destruct button". But party sources did not rule out the possibility of a retreat, in spite of a letter from the Prime Minister giving short shrift to Mr Blair. Mr Major rejected the Labour leader's call for a debate next week. But one way out of the row could be to replace a debate on tourism next Friday with a debate on Europe without a vote at the end.
Almost six years to the day since being challenged in the leadership election, Lady Thatcher told the Euro-sceptics, many of whom were her natural supporters, to reject Mr Blair's overtures and back Mr Major. Praising Mr Major for "persistence, imagination and skill" in taking forward her brand of Conservatism, she said he had gained exemptions from the social chapter which Mr Blair would sign up to.
She rejected Mr Blair's admiration of her leadership. "It is flattering to learn that we are all Thatcherites now. In fact, the Road to Damascus has never been more congested ... "
Mr Blair did not understand the philosophy behind her policies and could not put them into practice. "They would be blown off-course, and the reefs of interventionism are no less dangerous, and the sirens of financial profligacy no less alluring, than they were in the past. We have to appreciate the fact that socialism is not dead. It is not even asleep. It is visibly stirring."
The only other minister praised was the Home Secretary, Michael Howard, seen by many as the leading right-wing candidate for the leadership.
But Lady Thatcher's remarks, in a lecture in memory of Nicholas Ridley, one of her supporters, are unlikely to damp the full-scale revolt among Tory MPs. Teresa Gorman, one of the Euro-sceptic MPs, said the Tory MPs "smelt a rat" about the possibility of the Chancellor agreeing to measures at the Ecofin meeting.
They want a debate before the end of next week. Labour helped to whip up the expectations of a government defeat by saying it will seek to defeat the Government on the technical motion passing the documents from the European Commission which have caused the row.
Reports that the Government could be brought had alarm bells ringing in Dublin, where ministers are preparing for the December summit as presidents of the EU and also trying to stop the Northern Ireland peace talks collapsing.
In spite of the threats by the Northampton North MP Tony Marlow, a Tory Euro-sceptic, to resign the whip, Mr Blair said he would not table a no- confidence motion on the Government until he believed Labour could win it. Labour yesterday viewed that prospect as highly unlikely. But it could change if early by-elections in Barnsley East and Wirral South rob Mr Major of his majority.
The former chancellor and leading Euro-sceptic Norman Lamont said extending the debate before the Dublin summit to two days could provide a way out of the impasse, provided there was a proper discussion of the documents. "I think in the interests of maintaining the unity of the Conservative Party in the run-up to the election ... that it is essential that we do have a debate on something which is very important," he said on BBC radio.
John Redwood, the former leadership challenger, told a meeting in King's Lynn: "Parliament won the right to hold the executive to account more than three hundred years ago in the Civil War ... I urge the Prime Minister to recognise the strength of parliamentary feeling." Mr Major, who spent the day in his home in Huntingdon preparing a speech for next week's Tory women's conference, will next week meet Sir Marcus Fox, chairman of the 1922 Committee of Tory MPs, to hear their concerns about the Government's blunders.
A month is a very long time in politics: countdown to the end of 17 years of Tory rule?
Key dates for the crisis facing the Government
Tuesday 26 November - Chancellor's Budget statement
2 December - European finance ministers' meeting (Ecofin), attended by Kenneth Clarke
3 December - vote at the end of the Budget debate
December 4/5 - possible date for Government European debate on the `adjournment of the House'.
December 12 - John Major's one-seat majority could be wiped out if Labour wins the Barnsley East by-election
December 13-14 - Dublin summit. Mr Major has to defend Britain's opt- out on the single currency.
December 16-17 - European agriculture ministers' meeting- possible beef deal for Ulster farmers.
December 19? - possible date for Tory Wirral South by-election - defeat would put the Tories in a minority for the first time since 1979.
December 26 - Boxing Day; The Sun says it could be election day; even the Euro-sceptics dismissed such speculation as `extravagant'.Reuse content